rpadebet Posted August 28, 2013 Share Posted August 28, 2013 @txlaw Very cool, thanks for that Kiva post and plus 1 on the best CEO, capex/profit margin situation and that it probably looks too expensive right now (I'm waiting for around 8 or 9 times BV myself). Two things to add to the stuff you've already said. First, from that Kiva site it's not much of a stretch to think that Amazon could automate the entire storage, picking, packing and shipping sections of their warehouses in the future and so instead of using 1000 people per shift they could use 250 or so and the work would also get done at a quicker speed. The reasoning behind that thought is that the major obstacle they had when I was there was in the first stage where they got the stuff off the trucks and were logging the various products into the system. One thing they'd started doing before I left was getting the exact dimensions of every product scanned in so they could recommend boxes, but presumably once the system has that info then new pallets that arrive could conceivably be picked apart by robotic arms with scanners on them which enter them into inventory, store them on those moving units, order comes through online, specific unit gets located by Kiva robot, takes storage unit to packing section, another robot arm scans and places it into a packing machine, packing machine puts wrapped article onto conveyor, conveyor spills package into correct bin, once full the bin gets replaced and moved onto waiting truck by another Kiva robot and you'd basically have a completely automated system except for the technicians who fix the belts, robots and maintain the system hardware and software. Just an idea, but the necessary tools all seem to be there. As far as a WalMart assault goes, it'll be interesting for sure. I'm skeptical that they'll win it, but clearly they'll give it a shot. On the one hand, I wonder whether they'd choose to convert their distribution centers or build fresh and run alongside because I think they still need those in their current form and capacity for their B&M stores. Then, as they become more of an online entity they'll need to shut stores and warehouses and lay people off. There might be alot of pain there and when do you close the B&M stores and how many, and how does the public and Wall Street react, etc, etc? Something that valueInv (whose posts I may or may not have been slightly over-critical of) had in one of those articles was a comment about the ability of corporations to turn on a dime which effectively said that they couldn't and to some extent I agree though in the case of large-scale retail I think that goes to Amazon's advantage. Can WalMart change its deeply-held approach to retail while Amazon uses a modern take on the age-old customer-first strategy? My tendency is to say it's pretty unlikely because it's a new format which Amazon has created and has a 15-year head start in intellectually and logistically. And this is also why I disagree with what the "Trust Him He's Rich" article states because the writer unfortunately has some imagined artsy mental creation where the nuts and bolts nature of what Amazon does happen to not exist. Bezos has quite obviously changed retailing just like Sam Walton did before when folks used to have to go to a bunch of different shops for all their items and to me anyway, that should necessarily be factored in. I think now that Sam Walton's passed and his successors have left - for me the company (any company, but especially retail, tech, maybe a few others) loses that passion after the 2nd generation. I'm not saying it starts to suck or anything but this goes back to the leadership issue, for me it's more important in these industries than in others because of the drive and near fanaticism as well as creativity and discipline that it requires to build it from scratch and this is something I think a number of people (yourself and other commenters included) apparently realize about Bezos. Anyway, I could go on for some time and no doubt I eventually will but I'll leave it there for now. Thanks for the insights and links and hopefully this thread will steer clear of some of the blustery and personal momentums that've unfortunately sometimes been present on some other threads. I mean, it obviously just happens to look like a very interesting company, where if anyone puts their preconceptions aside and gives the thesis a chance (and of course if the price is right) then it wouldn't be at all surprising to me if this turned out to be a reasonably profitable investment idea over the next 2 to 3 decades. Regards. Impressive warehouses. I decided to rum some quick, simple numbers to compare Walmart and Amazon: Amazon WMT Revenues 61093 469162 COGS 45,971 352488 Gross Profit 15122 116674 Operating Expense 14446 88873 Operating Income 676 27801 D&A 2835 8501 Net Income -39 16999 PP&E 9582 171724 Operating Margin 1% 6% Net Margin 0% 4% ROA 2.50% 8.40% Cash 11448 7781 Normalized to sales Operating Expense 24% 19% D&A 5% 2% PP&E 16% 37% Normalized to COGS Operating Expense 31% 25% Couple of things I found interesting: - Gross margins are the same despite Walmart being infamous for squeezing suppliers, while Amazon being known to sell many items at or below cost - I would have thought Amazon to be more efficient than Walmart on its operations with is advanced warehouses and all. Yet when you normalize opex to COGS, it seems that Amazon spends 31 cents to sell a dollar of inventory while Walmart spends 25 cents. What am I missing here? I have no dog in this fight and I must admit I know very less about this company from an accounting standpoint. But is it possible that Amazon is accounting for the discounts or "promotional pricing" as marketing/advertising expenditure? Because if they do that and include those expenses in SG&A, then like you said Gross margins will be comparable to Walmart's but the operating margins would be lower. I maybe totally wrong though. This is just an hypothesis. Link to comment Share on other sites More sharing options...
Liberty Posted August 30, 2013 Share Posted August 30, 2013 http://www.businessweek.com/articles/2013-08-29/amazon-takes-the-tax-fight-to-the-supreme-court Link to comment Share on other sites More sharing options...
Grenville Posted September 6, 2013 Share Posted September 6, 2013 It would be cool if Amazon can pull off a free or near free smart phone. "Amazon may offer upcoming smartphone for free. Who's next?" http://www.cnbc.com/id/101015435 Amazon may soon offer its long-awaited smartphone to customers for free, former Wall Street Journal reporters Jessica Lessin and Amir Efrati said in a blog post Friday. Full story: "Exclusive: Amazon Wants To Offer Its Smartphone for Free. Who Will Follow?" http://jessicalessin.com/2013/09/06/exclusive-amazon-wants-to-offer-its-smartphone-for-free-who-will-follow/ Link to comment Share on other sites More sharing options...
Guest valueInv Posted September 6, 2013 Share Posted September 6, 2013 It would be cool if Amazon can pull off a free or near free smart phone. "Amazon may offer upcoming smartphone for free. Who's next?" http://www.cnbc.com/id/101015435 Amazon may soon offer its long-awaited smartphone to customers for free, former Wall Street Journal reporters Jessica Lessin and Amir Efrati said in a blog post Friday. Full story: "Exclusive: Amazon Wants To Offer Its Smartphone for Free. Who Will Follow?" http://jessicalessin.com/2013/09/06/exclusive-amazon-wants-to-offer-its-smartphone-for-free-who-will-follow/ As predicted. Link to comment Share on other sites More sharing options...
Guest wellmont Posted September 6, 2013 Share Posted September 6, 2013 possibly entry level phone is free to prime customers and amzn will get a commission for selling the service plans at time of purchase. they will also charge extra for chargers, cases, etc. there will also be advertising (offers). something to watch. I don't see how the numbers work though. Link to comment Share on other sites More sharing options...
rkbabang Posted September 9, 2013 Share Posted September 9, 2013 Amazon: No Phone Launch ‘This Year’ and ‘Would Not Be Free’ Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 1, 2013 Share Posted October 1, 2013 The problem with building a long term business while losing money is that others come and steal the punchbowl away while you're still building your business: http://pandodaily.com/2013/10/01/here-comes-another-netflix-for-books-this-time-from-scribd/ This happened with Amazon's music business. We may just see it with the books business. Link to comment Share on other sites More sharing options...
txlaw Posted October 1, 2013 Share Posted October 1, 2013 Bezos book recommendations to his execs: http://www.farnamstreetblog.com/2013/10/jeff-bezos-read-these-books/ Bezos recommends the Innovator's Solution, which says a lot about how Bezos thinks about business. And it's why I think he's the best CEO in tech. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 3, 2013 Share Posted October 3, 2013 Amazon: No Phone Launch ‘This Year’ and ‘Would Not Be Free’ Here we go again: http://techcrunch.com/2013/10/02/amazons-smartphones-detailed-project-smith-3d-flagship-model-and-a-value-handset-with-fireos/ Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 3, 2013 Share Posted October 3, 2013 Hey all: I want to stir the pot a little! Let me ask the folks who are bullish on AMZN a question... At what price would AMZN be too expensive? I don't think ANYBODY would say that AMZN is cheap at over $300/share...The question is HOW expensive is it. At what point does it become too expensive? $400/share, $500/share, $800/share maybe even higher? I appreciate your response. Thanks Link to comment Share on other sites More sharing options...
link01 Posted October 6, 2013 Share Posted October 6, 2013 since every one & their cousin has a short thesis or neg view of amzn's valuation I thought it would be interesting to post a few bullish case links to articles here to balance the debate out a bit. in fact, they're really the only ones I could find online that had at least a smattering of rigor at all. http://www.scribd.com/doc/98208572/ValueXVail-2012-Josh-Tarasoff (eric50 posted this earlier in the thread, thx eric) http://seekingalpha.com/article/1648832-is-amazon-worth-its-price (this is not really a bullish article but it lays out a what-if matrix that could support a bullish case for amzn's valuation) http://seekingalpha.com/article/884981-understanding-amazon-what-you-really-need-to-know http://seekingalpha.com/article/942551-top-10-pick-amazon-financials-understate-growth http://seekingalpha.com/article/1405211-arne-alsins-1-pick-amazon-com?source=yahoo its also interesting to note that morningstar pegs amzn fair value at 300 per share, altho their analysis does little to show how they arrived at that #. Link to comment Share on other sites More sharing options...
Grenville Posted October 8, 2013 Share Posted October 8, 2013 Nice 30min interview with Marc Lore and Vinnie Bharara founders of Diapers.com (Quidsi) http://www.npr.org/2013/09/18/223785364/marc-lore-and-vinnie-bharara-founders-of-diapers-com They talk about founding the business and the early years. Link to comment Share on other sites More sharing options...
DCG Posted October 8, 2013 Share Posted October 8, 2013 its also interesting to note that morningstar pegs amzn fair value at 300 per share, altho their analysis does little to show how they arrived at that #. Sounds like most valuations on Morningstar. Link to comment Share on other sites More sharing options...
plato1976 Posted October 8, 2013 Share Posted October 8, 2013 Hey all: I want to stir the pot a little! Let me ask the folks who are bullish on AMZN a question... I do think it's cheap; AMZN is cheap as long as its market value is below Walmart's /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// At what price would AMZN be too expensive? I don't think ANYBODY would say that AMZN is cheap at over $300/share...The question is HOW expensive is it. At what point does it become too expensive? $400/share, $500/share, $800/share maybe even higher? I appreciate your response. Thanks Link to comment Share on other sites More sharing options...
Grenville Posted October 8, 2013 Share Posted October 8, 2013 U.S. court rules in favor of Amazon in CIA contract dispute http://www.reuters.com/article/2013/10/08/net-us-amazon-ibm-ciacontract-idUSBRE9970NZ20131008 A U.S. court ruled in favor of Amazon.com Inc in the online retailer's dispute with IBM over a $600 million cloud computing contract awarded by the Central Intelligence Agency, a court notice showed. Link to comment Share on other sites More sharing options...
txlaw Posted October 9, 2013 Share Posted October 9, 2013 Nice 30min interview with Marc Lore and Vinnie Bharara founders of Diapers.com (Quidsi) http://www.npr.org/2013/09/18/223785364/marc-lore-and-vinnie-bharara-founders-of-diapers-com They talk about founding the business and the early years. Thanks! There also appears to be an interview with the founder of Kiva Systems in that show as well. In another AMZN news, they are releasing a "Pay with Amazon" feature for third party websites: http://blogs.wsj.com/digits/2013/10/08/amazon-targets-rival-paypal-with-online-payment-option/ Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 9, 2013 Share Posted October 9, 2013 Online payments can be a brutal business. Amazon.com pushes a Visa credit card on its main website instead of its ACH payment system. This suggests to me that Amazon (like Paypal) is having a difficult time with fraud. If you pay through ACH, you can't make unusually large purchases or buy digital downloads or buy gift cards. That's the payment network side of things. On the payment gateway side of things, both Paypal and Amazon help merchants accept credit card payments. I think Paypal has an advantage in that area as its anti-fraud technology is pretty good. (Unfortunately, it also has a very high false positive rate... which is frustrating for legitimate customers. And you can't buy gift cards with Paypal in many cases.) Link to comment Share on other sites More sharing options...
txlaw Posted October 11, 2013 Share Posted October 11, 2013 http://www.businessweek.com/articles/2013-10-10/jeff-bezos-and-the-age-of-amazon-excerpt-from-the-everything-store-by-brad-stone Link to comment Share on other sites More sharing options...
wescobrk Posted October 11, 2013 Share Posted October 11, 2013 Just read it. Can't wait to read the book when it's released on tues! Link to comment Share on other sites More sharing options...
txlaw Posted October 11, 2013 Share Posted October 11, 2013 Just read it. Can't wait to read the book when it's released on tues! Let us know what you think of the book when you're finished. :) Link to comment Share on other sites More sharing options...
JAllen Posted October 11, 2013 Share Posted October 11, 2013 http://www.businessweek.com/articles/2013-10-10/jeff-bezos-and-the-age-of-amazon-excerpt-from-the-everything-store-by-brad-stone This article was fantastic! The author, during the writing of the book, actually informed Jeff's father that his long-lost son, whom he hadn't seen since Jeff was three years old back in '67, was the founder of Amazon.com and a billionaire, at the end of 2012! That blew me away.... I'll read the book the day it comes out. Link to comment Share on other sites More sharing options...
Liberty Posted October 11, 2013 Share Posted October 11, 2013 http://www.businessweek.com/articles/2013-10-10/jeff-bezos-and-the-age-of-amazon-excerpt-from-the-everything-store-by-brad-stone Thanks, didn't know about that one. Added the book to my list. Link to comment Share on other sites More sharing options...
wescobrk Posted October 11, 2013 Share Posted October 11, 2013 "Let us know what you think of the book when you're finished." Sure! I've had it on pre order on amazon for at least two months. The date was delayed after bezos bought the post presumably so the author could cover it in the book. Link to comment Share on other sites More sharing options...
Grenville Posted October 15, 2013 Share Posted October 15, 2013 Soap Opera: Amazon Moves In With P&G E-Commerce Giant Sets Up Shop Inside Warehouses of Suppliers http://online.wsj.com/news/articles/SB10001424052702304330904579135840230674458 Article talks about how Amazon is working inside supplier warehouses and highlights a 3yr relationship working with P&G in their warehouses. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 18, 2013 Share Posted October 18, 2013 love the name...Jeff Bezos’s League of Shadows ;D http://www.businessweek.com/articles/2013-10-17/jeff-bezos-s-league-of-shadows#r=nav-fs Link to comment Share on other sites More sharing options...
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